Demand for apartments outstrips supply in major Irish lifestyle change

FOLLOWING a steady start to 2003, demand for new apartments in Munster grew significantly throughout the year with particular interest in properties situated in Limerick, Cork and Waterford city centres.

There was a level of uncertainty at the start of the year brought on by falling stock prices, a poor economic climate and the war in Iraq meant that sales were slow, confidence was low and only the minority of 'cute investors' were willing to make buying decisions.

However, with continuous low interest rates, the level of unease quickly settled and a new level of energy returned to the market resulting in price rises of between 12-14% for 2003.

In Cork city centre demand was very strong for apartment developments at Georges Quay and Copley Street. In Dublin Docklands 400 apartments at Smithfield sold out with 36 hours of going onto the market last March at starting prices of about €270,000 €285,000.

As 2003 went on, the appetite for property investment in prime city areas reached an all-time high, largely because of a low interest rate climate. The search for investment apartments became so intense this year that investors/owner occupiers moved out of the city centre to the satellite towns. Apartment developments in Midleton like Carlton Wharf and Cois na hAbhann of Bailick Road, Ballincollig's An Caislean by Frinailla builders and Old Quarry by O'Brien & O'Flynn to The Halfways' An Bruach by MMD Construction all picked up buyers. With these developments selling rapidly, it was the faster-moving investors that held sway and the owner-occupiers walking away empty handed.

With little movement in the second hand apartment market due to owner-occupiers and investors holding on, this has had an affect on prices with low stock levels of second hand apartments on all agents' books thus creating further demand for new apartment blocks where they can expect parking, en-suite bathrooms, balconies, utilities and cloak presses.

Thankfully apartments got bigger in 2003 as in the first nine months of this year there was only 22% of registrations less than 60 sq m compared to as many as 45% in 1998. Lack of supply due to the inability of the planning process to react quickly to the new demand for apartments has led to a fall in the number of apartments registered.

Home Bond registrations in Cork for 2002 stood at 757 while apartments in Cork from January 1, 2003 to September 30 last, stood at 422.

However as more resources are being pumped into this area I would expect apartment numbers to increase, while Section 50 applications are also very strong in the western suburbs despite a high number of recent refusals.

With large apartment developments with planning permission in Ballincollig, Co Cork The Old Army Barracks and in the planning process is Watercourse Road, hopefully this bottleneck will be solved if schemes get out of the pipeline.

With low interest rates and high demand, the new apartment market will remain very buoyant in 2004. Like it or not, price levels are set to increase and probably at the pace we have seen in recent years.

The Government continued to make life difficult for apartment buyers/investors during the year and the recently proposed substantial increase in levies will inevitably push prices higher. This is in addition to the extra VAT charges introduced at the beginning of 2003. Recent studies show that the Government take is now 40-42% of the price of a new apartment. No wonder they keep trying to put the spotlight on the supposedly 'greedy' builders.

Capital appreciation will be at its highest for apartments in city centres, and on waterfront locations such as Harty's Quay in Rochestown which has seen 20-40% gains in 2003, with a new phase set for construction in 2004.

Expect to see some dramatic architecture with new living and leisure ideas next year already an apartment development in Ballincollig will have an exercise room, playground and communal roof gardens.

Naturally these enhanced apartment options will be pursued as strongly by investors as occupiers. Expect these schemes to be again sold off plans. Next year will see the launch of several projects aimed at the higher end of the market including the old Grand Parade Hotel site in Cork city.

As it will take three to five years of intense building by developers for supply to catch up with the massive demand in Munster's cities, home hunters who have seen price inflation outpace savings ability have the option to buy now or live to regret it.

* Barry Nagle is a director of Global Properties Ltd.

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